Figure 6.3.2
-Refer to Figure 6.3.2 above. An examination of the production isoquants in the diagram below reveals that:
A) capital and labor must be used in fixed proportions.
B) capital and labor are perfectly substitutable.
C) the isoquants have a constant MRTS.
D) Both B and C are correct.
E) none of the above

Question

Figure 6.3.2
-Refer to Figure 6.3.2 above. An examination of the production isoquants in the diagram below reveals that:
A) capital and labor must be used in fixed proportions. 
B) capital and labor are perfectly substitutable. 
C) the isoquants have a constant MRTS. 
D) Both B and C are correct. 
E) none of the above

Quizplus · Accepted Answer

The isoquants have a smooth curvature, indicating that capital and labor are substitutable to some extent, but not perfectly so, which means the isoquants do not have a constant slope and, hence, a constant MRTS. Therefore, option A is incorrect. The fact that the curvature of the isoquants changes shows that capital and labor are substitutable to some degree, which is consistent with option B. As we move from left to right along an isoquant, the slope becomes steeper, implying that more and more labor is required to compensate for a given reduction in capital. This implies that the MRTS decreases as we move downward along the isoquants, so option C is also incorrect. Therefore, the best answer is D, which states that both B and C are correct.

Figure 6.3.2 -Refer to Figure 6.3.2 Above. an Examination of the Production